While agriculture in Austria remains at a very high level and is the world leader in organic farming, it is facing similar challenges to other farming economies in Europe. Challenges relate to a change in the EU’s common agricultural policy and external threats not influenced by farmers in Austria themselves.

Organic farming – overview

Austria has for many years been relying on environmentally friendly farming methods due to consumer expectations and the climatic and climate, and geographical conditions. Austria has consistently pursued a quality policy instead of promoting the highest possible yield per hectare.
 
At the top of such a defined agricultural policy is organic farming. Austria is recognized as an organic farming pioneer in Europe, and the first organic farms in the world were registered in Austria in 1927, i.e. almost 100 years ago. Austria also became the first country to establish national regulations on organic farming ten years before the European Union adopted similar solutions. The Austrian agricultural philosophy considers organic products much more than just a niche. Austria has already achieved the EU target set in the European Commission’s flagship strategy. Currently, 23% of Austrian farmers benefit from organic farming advantages, while more than 25% of all agricultural areas are managed according to high environmental standards. The main goal is to promote the most ecological use of land to maintain a good quality of soil, water and air for the next generations.
 
In 2020, more than 10% of supermarket turnover in Austria came from fresh, organic products. Compliance with the requirements for organic food forces the resignation from biotechnology. Austrian consumers do not accept chemical fertilizers, pesticides or genetic engineering (commonly used in other countries). This creates serious challenges for food producers, farmers and input suppliers. Despite the limitation of the use of chemical fertilizers and pesticides, average yields of, for example, maize in Austria are higher than in the United States. High average yields raise legitimate questions about the sense of using chemical growth enhancement. As the Austrian example shows, similar results are possible by increasing the use of organic substances, promoting crop rotation or caring for animal welfare. So far, as the pioneer, Austria has avoided the introduction of genetically modified crops into its agriculture and has managed to maintain sustainable production methods with quality and hygiene throughout the food production process, from the field to the table.

EU agricultural policy – new challenges?

Implementation of the new EU agricultural policy in Austria, according to the current assumptions, would entail significant restrictions on the operation of organic farms, constituting a significant share of the total number of Austrian farmers. This is now the main concern and point of contention in talks between farmers and the Austrian government.
 
Notwithstanding the above, Austrian entrepreneurs are currently facing the following challenges:

  • Ownership structure, based on small and medium-sized enterprises: This significantly hinders competitiveness in the European and global market, limiting development opportunities also in the internal market. The small scale of operations limits access to capital and qualified personnel, which results in lower expenditure on new ecological technologies.
  • Poorly developed network of connections between individual entrepreneurs: In Austria, there are several networks of entrepreneurs and clusters, but their cooperation is quite limited. Undeveloped connections hinder the exchange of experiences and the creation of a common research and development infrastructure.
  • Poor dynamics of development in the local market: While Austrian companies are dynamically developing on the international market, a result of a strong emphasis on the export of the ecology and environmental services sector, the local market for ecological services and products has lost its momentum and is not growing as dynamically as 10-15 years ago. Local markets reached a certain limit of growth at the current level of development of the general economy, potentially influenced by the decreasing price competitiveness of organic food. Changes in the global markets may have a further impact on household incomes, adversely affecting the growth in demand for green products and services.
  • Maintaining the profitability of farms after implementing the new EU agricultural policy: Thanks to the government’s agricultural policy, a robust organic farming sector has been built over the past few decades. Running such farms requires much more expensive than in the case of intensive farming, and a change in the method of financing organic farms may disturb their income levels.
  • Ensuring adequate animal welfare: Austria is one of the few countries in the European Union to have legal regulations regarding the welfare of farm and farm animals, adopted in 2004. Regulation and recommendation compliance requires additional effort and resources. Also, the epizootic disease occurrences in Austria and neighbouring countries raise concerns about maintaining livestock production levels in the coming years, especially for pigs.
  • Maintaining the yield of crops, especially with the limited possibility of using chemical fertilizers and pesticides on organic farms: While Austrian farmer productivity is currently comparable to intensive-agriculture farmers, the inevitable progression of climate change may impact growing conditions. On top of the climate change risks, there may be biological threats (new varieties of diseases) that will be difficult to combat due to the limited possibilities of using plant protection products in organic farming.

Overall, while agriculture in Austria remains at a very high level and is the world leader in organic farming, it is facing similar challenges to other farming economies in Europe. Challenges relate to a change in the EU’s common agricultural policy and external threats not influenced by farmers in Austria themselves.

This article is a part of our Foodprint publication focusing on issues and risks facing the Food & Agriculture industry. Read the publication and learn more about insurance solutions and the growing importance of risk management and alternative solutions like parametric insurance.

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